Market looks strong for California potato deal

by Tim Linden | May 23, 2013

As harvesting of new potatoes in California’s Kern County moves into peak production, the marketing outlook is strong — at least for red, whites and yellows.

Several growers and shippers began digging during the week of May 6, with virtually everyone joining the party by the following week. By the week of May 20, it was predicted that most sheds would be ramping up to full production. Typically, shipments of fresh potatoes from the southern region of the San Joaquin Valley go into early July.

Tom Drulias, owner of T.D. Produce Sales in Bakersfield, CA, which is the sales agent for Lehr Bros. and Big L Packers, said the district was poised for a very good marketing season as acreage of reds, whites and yellows were each down more than 10 percent. “It looks like whites are down 13 percent, reds are down 12 percent and yellows are also down 12 percent,” he said. “And the russet acreage is down significantly — 65 percent.”

He added that the drop in acreage is the result of the 2012 season, “which was a very tough year for the Kern County potato deal.”

Dennis Johnston, partner in Johnston Farms in nearby Edison, CA, concurred with the acreage decreases and the reason for it. “We cut our russet acreage in half,” he said. “I just can’t understand why they plant so darn many russets in the storage states,” he said. “They had alternate crops like wheat where they could have made some money.”

Mr. Johnston, who has been involved in the potato deal for many decades, said that in the old days, the storage states would be out of potatoes by June 1, giving Kern County a nice window for the start of the fresh deal. “Now they go into July and August and have their storage crops competing against their own fresh potatoes. It just doesn’t make any sense. All winter they have been selling bales and cartons for $3-$5. That doesn’t even cover packing costs.”

He said if the goal of the storage states is to gain market share by knocking Kern County out of the russet deal with well-below cost prices, their strategy is working. But he still doesn’t understand why they willingly overplant knowing the market is going to suffer. “They have already predicted an oversupply again next year and they are still planting.”

He said the russet acreage in Kern County has dropped to about 1,000 acres from a high of 12,000 to 14,000 acres a couple of decades ago. “We are still hoping that we can have some kind of deal with the russets,” he said, “but it doesn’t look good.”

The Norkota russet is the variety that has established itself in Kern, though Johnston Farms planted the Canela this year. He said it is a very nice russet with a good shape that cooks very well. But Mr. Johnston and other Kern County growers are practicing what they preach. “We planted wheat on the russet acreage that we cut back,” he said. “We used to only plant wheat as a rotation crop but this year we are going to get our money back on that acreage.”

Because red, white and yellow potatoes do not have the storage capacity of russets, Mr. Johnston said there continues to be a place for Kern County shippers with those varieties. “We have a window for those potatoes and I believe we always will. A lot of guys here are playing around with little potatoes and fingerlings and other specialty potatoes but backing off on their russets.”

He said there was a time when supermarket buyers looked forward to the start of the new deal and wanted to switch to fresh potatoes, which cook better and taste better, according to Kern County potato experts. “That doesn’t seem to matter anymore. Nobody seems to sell ‘fresh’ potatoes anymore, they just sell potatoes.”

But this was not a doom and gloom conversation, Mr. Johnston said the f.o.b. market on reds, whites and yellows was very strong, with every indication that each would remain in that favorable position for the foreseeable future. “Reds are $26 per hundredweight right now (May 10) and it looks like they will be moving to $28 next week. Whites are about $24 per hundredweight and yellows are up at $37. It is a very good market, and unexpected, at least for the reds.”

He said many growers cut back on their reds because during the planting season, the red market was only at $10 and growers thought they would be looking at red in the ink as well as in the carton. But the market turned around this spring and Kern County shippers couldn’t be happier.

Brett Dixon, president of Top Brass Marketing Inc. in Bakersfield, which is the exclusive sales agent for Vignolo Farms, had similar comments on May 10 about the beginning of this season. “We are in a demand-exceeds-supply situation,” he said, speaking of the reds, whites and yellows as well as organic potatoes, fingerlings and purple specialty potatoes. “Actually, the demand warrants probably a little higher price but as the volume picks up in the next week or so, we will just have to bring it back down so we are trying to hold the line.”

However, he said that favorable pricing has increased demand even more. Like the others, Mr. Dixon said the drop in acreage this year in Kern County should create a good marketing situation for the entire season. “We actually didn’t decrease our acreage. I begged our grower to keep it the same and he did, which appears to be a good decision.”

Mr. Dixon said Top Brass and Vignolo Farms have no russets but they have increased their acreage of the specialty potatoes over the years. He said those varieties are increasing in popularity and do give a good return, but noted that they are sold by the pallet rather than by the truck. “We carry them to offer a full line of potatoes. We don’t want to give our customer a reason to go anywhere else,” he added.

As far as excitement for the new potato deal each season, Mr. Dixon said it depends on the customer. He agreed that the price-centric customers do not put a lot of stock in where the potatoes are coming from as they just want the cheapest ones available. “But we have a lot of customers who are tired of storage potatoes and look forward to the start of our season every year.”

Transportation is always a very important factor for the Kern County potato deal as when freight rates are high, movement can be adversely affected. “Transportation by truck is going to be difficult again this year,” said Mr. Drulias. “We will have enough transportation with trucks, rail, intermodal and RailX but it could be expensive.”

Mr. Johnston concurred. “The railroads have priced themselves out of this deal. I just don’t think they want to move potatoes anymore. We are going to have to use trucks, which are expensive and RailX. We will just have to see how it plays out.”